The Finance Minister has presented his 10th consecutive budget in the Jatio Sangsad on June 07. His prelude to the Budget Speech has been full of feelings and sentiments of his sincere efforts in offering the budget. Himself a language activist, freedom fighter, an erudite human being, the FM's capability needs no mention. He is respected widely for many qualities inherent in him.
The budget is a document that stokes phobia among the lower and middle class people. It quite often adds pains for the commoners at large. This year, however, the price spiral for Ramadhan has been absorbed by the people. And during these tough days of absorbing high prices, the direct impact of the budget has not been seriously felt yet. Not because its impact on prices is zero but the fact is that people have become somewhat attuned to the shock.
This time, contrary to people's expectations, the budget appears to have taken more care of the banking sector in terms of undue facilitations. Tax rate would be reduced for the sector when it is literally drowning in non-performing loans (NPL). This proposal is outrageous. As the country is heavily affected by NPL, this proposal must be withdrawn. The capital market has been gravely affected by the banking sector scam. Despite these scams, the budget has overtly favoured the NPL delinquents.
Huge amounts NPLs are blocked up. Thus the investment income to banks on this loan is negative. This is because cost of fund is absorbed in the good borrowers' loan. The amount lent to continuing borrowers are also burdened with high interest cost. Thereby the interest rates are not being cut down. The government has been advocating for long to reduce interest rate at single digit. But it must not be forgotten that rate of interest is a function of demand and supply of loans to borrow and lend vis-a-vis supply of funds on loan chains.
A genuine people's government would have penalised the defaulters and delinquent borrowers. But, it seems the government is favouring them with NPL. The 15 per cent NPL overall, 35 per cent in the state-owned banking sector and 10 per cent in private banking sector, has overshadowed many accomplishments of the government. Instead of forming the long-awaited banking commission to deal with poor governance in banks and NPL issues, the delinquent borrowers have been nakedly favoured by reducing income tax rate. It was not anticipated at all. This has derogated the well versed budget speech, its spirit of justice and fairness.
The apex chamber, FBCCI has expressed its dismay over inordinate favour bestowed on the banks and the defaulters.
Masih Malik Chowdhury, a Chartered Accountant, is Founder Partner, Masih Muhith Haque & Co, & Past President (2015) of ICAB. masih@masihmuhith.com